Fastest Pace Of Downgrades Ever (Since 2002)

The chart above is shocking because it shows 25% of households who make over $150,000 per year had no emergency savings in 2018. If you make that much money and don’t have an unusual number of dependents or very high debt levels, save your money for a rainy day. While the value of money changes depending where you live (NYC & Los Angeles are expensive), you should still be able to save some money with a high income. Tough choices might need to be made, but that’s preventing even tougher choices if you lose your job.

Markets Need Certainty

Markets don’t need there to be a cure to COVID-19 to stop panicking. They need uncertainty to end. Because the Chinese data wasn’t fully trusted and Italian cases were exploding, many had no idea what COVID-19 would do to the population. Now we have a better idea. There will be economic shutdowns that last a few weeks or months which help stem the growth in cases. That’s great for stocks. Italy’s stabilization correlated with the decline in volatility. The chart on the left shows the daily case growth falling. The number of new cases per day peaked on March 21st in Italy which helps us model out other countries. It’s great that the death rate in America hasn’t been as bad as Italy. (NOTE: Italy had an increase in cases on March 26th, but it stayed below its March 21st peak).

Conclusion

There has been a huge slew of bond downgrades especially in the energy sector which has been hit by the price war and demand destruction. This time, energy and non-energy spreads are spiking because it’s a recession and 2015-2016 was just a slowdown. Unemployment insurance will help prevent a complete economic collapse. Unemployment insurance is cyclical. It’s better to lose your job in a recession than the end of an expansion when benefits can be taken away or hard to get. Now it’s hard to file because of the call volume, but once you reach someone, you will get your benefits. Italy’s stabilization is key for stocks because it helps investors model America’s infection rate.

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